Bhansali Engineering Polymers Limited (NSE:BEPL)'s Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bhansali Engineering Polymers Limited (NSE:BEPL) is about to trade ex-dividend in the next 2 days. You will need to purchase shares before the 19th of September to receive the dividend, which will be paid on the 4th of October.

Bhansali Engineering Polymers's next dividend payment will be ₹0.50 per share, and in the last 12 months, the company paid a total of ₹0.50 per share. Calculating the last year's worth of payments shows that Bhansali Engineering Polymers has a trailing yield of 0.8% on the current share price of ₹61.05. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Bhansali Engineering Polymers

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Bhansali Engineering Polymers is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Bhansali Engineering Polymers's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Bhansali Engineering Polymers paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Bhansali Engineering Polymers has grown its earnings rapidly, up 100% a year for the past five years. Bhansali Engineering Polymers is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, Bhansali Engineering Polymers has lifted its dividend by approximately 22% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Bhansali Engineering Polymers got what it takes to maintain its dividend payments? We love that Bhansali Engineering Polymers is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

Curious about whether Bhansali Engineering Polymers has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.